Over the past year, the OECD secretariat has prepared research papers on critical elements that are common to bilateral investment treaties (BITs).  The papers examine concepts – shared by the investment treaties of many nations – such as fair and equitable treatment of foreign investors, indirect expropriation and the right of governments to regulate.

In the United States, where the U.S. model BIT is presently undergoing revision, these important investor protections have come under intense fire from activists as being too protective of investors, at the expense of broader social objectives.

In the early stages of research, the OECD’s papers included summaries of existing law in various OECD countries and reviews of cases decided under investor-state arbitration procedures in U.S. BITs.  But as the exercise has progressed, it has become clear that the end product is likely to be a recommendation for governments to revisit their BITs with a view to amending these provisions.

There are clear adverse consequences to following such a recommendation, USCIB believes.  Lower standards of protection regarding the fair and equitable treatment of foreign investors – and greater hostility to claims of indirect expropriation – will lower the standards of protection U.S. companies enjoy when investing in overseas markets.  This is neither advisable nor acceptable.

“In a world increasingly in need of foreign investment, the OECD should be working to encourage it by enhancing standards of protection, not lowering them,” says Stephen Canner, USCIB’s vice president for investment and financial services.  “With less protection from risk, many developing countries may find companies reluctant to commit their resources to those countries, or willing to do so only at a higher price.”

Working through its Investment Committee and through BIAC, USCIB is seeking to limit the OECD exercise to research only, and eliminate the recommendation of changes to bilateral investment treaties.

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